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World markets muted amid sluggish China growth

World markets muted amid sluggish China growth

June 1st, 2011 by PAMELA SAMPSON, AP Business Writer in News

BANGKOK (AP) - World stock markets failed to make headway Wednesday as investors weighed the easing of severe supply shortages in Japan against sluggish growth in Chinese manufacturing and the prospect of more weak U.S. economic indicators.

Oil prices inched higher to near $103 a barrel amid the possibility that a weakening dollar could help push crude back to May's 30-month highs. The dollar fell against the yen and the euro.

European shares were down in trading. Britain's FTSE 100 fell less than 0.1 percent to 5,978.06 and Germany's DAX fell 0.3 percent to 7,272.71. France's CAC-40 slipped 0.2 percent to 3,998.41. Futures pointed to losses on Wall Street. Dow Jones industrial futures sagged 0.1 percent to 12,546 and S&P 500 futures were marginally lower to 1,232.

Japan's Nikkei 225 rose 0.3 percent to close at 9,719.61 after Bank of Japan Governor Masaaki Shirakawa said in a speech that supply and electricity disruptions caused by the March 11 earthquake and tsunami were easing. The economy could stage a moderate recovery starting in the second half of fiscal 2011, he said.

"Production has declined very sharply due to supply constraints caused primarily by the destruction of capital stock, disruptions in supply chains and a shortage of electric power," Shirakawa said in a speech. "Those constraints are, however, being relaxed more quickly than expected initially as a result of strenuous efforts by firms."

The better outlook helped raise shares of companies expected to benefit from the reconstruction of northeastern Japan, which was devastated by the twin natural disasters.

Hitachi Ltd., which builds nuclear power plants, rose 1.9 percent. Construction company Kajima Corp. jumped 2.2 percent, and Nishimatsu Construction Co. Ltd. gained 2.6 percent.

Elsewhere, South Korea's Kospi index slipped less than 0.1 percent to 2,141.34 after the government announced the country's inflation rate eased for a second straight month in May, to 4.1 percent.

Hong Kong's Hang Seng index drifted 0.2 percent lower to 23,626.43, led by losses in property shares that were overbought in the short term and were due for some profit-taking, according to Castor Pang, head of research at Core Pacific-Yamaichi. Property developer China Vanke Co. Ltd. dropped 2 percent in Hong Kong.

Mainland China's Shanghai Composite Index dropped 0.3 percent after data showed China's manufacturing sector easing in April. The state-affiliated China Federation of Logistics and Purchasing reported that its purchasing managers index, or PMI, fell to 52.9 in April, down from 53.4 in March.

"The slowdown in the PMI hurt, but overall market sentiment is good," Pang said.

Australia's S&P/ASX 200 failed to hold onto gains and closed flat at 4,707.30. Benchmarks in Singapore, Taiwan and Indonesia were higher.

Sentiment was contained by expectations that U.S. economic data will keep pointing to slowing growth. Markets expect headline manufacturing to drop three points when the Institute for Supply Management releases its manufacturing index for May in Washington later Wednesday.

The data is certain to "underscore the funk," DBS Bank Ltd. in Singapore said in a report. "It's not a great time for the recovery. Or more precisely, it's not a great time for those depending on recovery. Everything's soft and seemingly getting softer."

On Wall Street, the stock market ended higher Tuesday on signs that Germany might drop its demands for an early rescheduling of Greek bonds, paving the way for a deal that could prevent Greece from defaulting on its debt.

The S&P index gained 1.1 percent to 1,345.20. The Dow Jones industrial average added 1 percent to 12,569.79. And the Nasdaq composite rose 1.4 percent to 2,835.30.

These gains came in spite of a grim report on the U.S. housing market. Home prices in 12 of the 20 cities tracked by the Standard & Poor's/Case-Shiller index dropped in March to the lowest levels since the housing bubble popped in 2006.

Thirteen economic indicators, ranging from personal spending to manufacturing orders, have been weaker than economists had predicted, a sign investors and analysts say indicates that high gas prices are slowing growth more than anticipated.

Benchmark oil for July delivery was up 21 cents to $102.91 a barrel in electronic trading on the New York Mercantile Exchange. The contract added $2.11 to settle at $102.70 on Tuesday.

In currencies, the euro rose to $1.4415 from $1.4378 late Monday in New York. The dollar weakened to 81.36 yen from 81.50 yen.